DAILY MORNING NOTE | 2 August 2022

Singapore stocks kicked off the month of August in the black after tracking Wall Street’s third day of gains last Friday (Jul 29), with the Straits Times Index (STI) gaining 0.9 per cent, or 27.19 points to close at 3,238.75. Across the broader market, gainers beat losers 309 to 200 after 1.25 billion shares worth S$929.3 million changed hands. SPI Asset Management managing partner Stephen Innes noted that dovish messaging from the Federal Open Market Committee and better-than-feared corporate earnings may have strengthened investor sentiment. “Investors have been diving back into growth stocks with a rapidly slowing economy hinting at less aggressive tightening. And with the market in the ‘bad data is good’ mode, there has been little good economic news to reverse the path of least resistance,” he said.

WALL Street stocks ended modestly lower after a choppy session Monday (Aug 1) as petroleum-linked shares retreated, while Boeing rallied as it neared a resumption of deliveries of a key jet. A relatively quiet week for corporate earnings reports will end with a bang on Friday with the government jobs data for July, which will be closely scrutinized for clues as to whether the Federal Reserve can be expected to dial back its aggressive interest rate hikes, as markets hope. A survey of manufacturers showed slowing growth for the sector in July but showed that price increases have slowed dramatically. Meanwhile, petroleum giants Chevron, ExxonMobil and ConocoPhillips fell 2 per cent or more following a pullback in crude prices on worries about weakening demand. The Dow Jones Industrial Average ended down 0.1 per cent at 32,798.40. The broad-based S&P 500 shed 0.3 per cent to 4,118.63, while the tech-rich Nasdaq Composite Index dropped 0.2 per cent to 12,368.98.


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SG

Keppel Offshore & Marine (O&M), through its wholly-owned subsidiaries, Keppel AmFELS, Inc (Keppel AmFELS) and Keppel Shipyard Ltd (Keppel Shipyard), has been awarded contracts worth around S$75 million for the refurbishment and completion of 2 floating production units. The first contract is by Keppel AmFELS with Salamanca FPS Infra, LLC for the refurbishment of a floating production unit to be operated by LLOG Exploration Offshore, LLC, a private exploration and production company in the United States. The second contract is between Keppel Shipyard and MODEC Offshore Production Systems (Singapore) to support the completion of a floating production storage and offloading vessel. Chris Ong, chief executive of Keppel O&M, said: “As the demand for energy increases and the market improves, we are committed to support the energy transition through our innovative solutions.” The above contracts are not expected to have any material impact on the net tangible assets and earnings per share of Keppel Corporation for the current financial year, said Keppel Corporation in a regulatory filing. Shares of Keppel Corporation closed at S$6.96 on Monday (Aug 1), up S$0.08 or 1.16 per cent, before the announcement.

The Monetary Authority of Singapore (MAS) said on Monday (Aug 1) that it will be issuing Singapore’s inaugural sovereign green bond, which is known as Green Singapore Government Securities (Infrastructure) or Green SGS (Infra). The Singapore dollar denominated bond – which will be launched via a book-building process within the week – will have a tenor of either 30 or 50 years and a minimum issuance size of about S$1.5 billion. The exact tenor and issuance size will be determined based on prevailing market conditions, MAS said. Both institutional and individual investors can apply to purchase the inaugural Green SGS (Infra). Proceeds from the issuance will be used to finance expenditures in support of the Singapore Green Plan 2030, including the Jurong Region Line and the Cross Island Line, MAS said.

Centurion Corporation said on Monday (Aug 1) that it is expecting a “substantial increase” in net profit for the half year ended Jun 30, 2022. In a bourse filing, Centurion said the group is expected to record a “substantial increase” in the net profit attributable to equity holders of the company for H1 2022 “by not less than 250 per cent.” This is as compared to a net profit of S$17.2 million for the year-ago period, it added. The guidance is based on preliminary assessment of the group’s unaudited consolidated management accounts for H1 2022. The increase in net profit is primarily attributable to the recovery in the group’s operating performance, Centurion said. The group noted a net fair value gain in H1 2022 as compared with a net fair value loss of approximately S$14.5 million in H1 2021, in relation to its investment properties. It added that the gain was also mainly due to revenue contributions from the group’s newly expanded portfolio of purpose-built workers accommodation (PBWA) and accommodation related business, as well as a “robust” recovery in occupancy rates in its portfolio of PBWA and purpose-built student accommodation across Singapore, the United Kingdom and Australia.

US

US manufacturing activity continued to cool in July as more factories dialled back production in the face of shrinking orders and rising inventories. The Institute for Supply Management’s gauge of factory activity eased to 52.8, the lowest level since June 2020, from 53 a month earlier, going by data released on Monday (Aug 1). Readings above 50 indicate expansion, and the latest figure compared with a median projection of 52 in a Bloomberg survey of economists. The group’s measure of production also fell to a more than 2-year low; its gauge of new orders remained in contraction territory for a second month. The figures highlight softer demand for merchandise as the economy struggles for momentum. “Panellists are now expressing concern about a softening in the economy, as new order rates contracted for the second month amid developing anxiety about excess inventory in the supply chain,” said Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee. The ISM factory inventories index rose to 57.3, the highest since 1984 and suggesting stockpiles are mounting at more manufacturers. While many producers have been adding to inventories in the event of further supply-chain disruptions, the increase may also suggest some of the build is unintended. Separate data from S&P Global this morning showed a build-up in finished goods inventories for the first time since October 2020. That group’s final July overall factory purchasing managers index slipped to 52.2, a 2-year low.

A Twitter Inc shareholder has hit Elon Musk with a proposed class action suit, effectively joining the tech giant’s bid to block the world’s richest man from backing out of his pledge to pay US$44 billion to acquire the influential social networking platform. The lawsuit was filed in Delaware Chancery Court — the same forum that’s set to hold a fast-tracked trial in October of Twitter’s claims against Musk — by an investor who holds 5,500 Twitter shares. In addition to Musk, it names as defendants two “corporate acquisition entities” related to the deal. The suit, docketed Jul 29, targets Musk’s “lame rationales for reneging on his contract”, accusing the billionaire of fabricating excuses to get out of the buyout. Like Twitter’s earlier suit, it seeks a court order compelling Musk to consummate the transaction. Musk formally answered Twitter’s suit Jul 29 in a court filing that remains under seal. Tesla Inc, the electric vehicle maker run by Musk, didn’t immediately respond on Monday (Aug 1) to a request for comment on his behalf. Tesla isn’t named as a defendant. Musk declared his takeover bid for Twitter on Apr 14, a proposal Twitter’s board agreed to after Musk confirmed a funding package for the deal that included US$21 billion of his own money.

Pepsi will pay US$550 million for a stake in fitness-energy drink maker Celsius Holdings as part of a long-term strategic distribution agreement. Pepsi is getting convertible preferred stock equating to 8.5 per cent ownership in Celsius, the companies said on Monday (Aug 1) in a statement. The soft drink giant will become the preferred distribution partner globally for Celsius and will also nominate a director to serve on its board. Shares of Celsius jumped as much as 16 per cent in New York. The stock had been climbing recently amid analyst speculation that Pepsi could switch to Celsius after ending a distribution pact with Bang Energy. That partnership, struck in 2020, came undone amid disputes and lawsuits. Pepsi rose 1.2 per cent at 10:35 am New York time. Celsius, founded in 2004, has seen fast growth for its low-sodium, vitamin-infused beverages that help burn calories. Pepsi also owns the popular Gatorade sports drink brand. In 2019, Pepsi acquired CytoSport, which makes Muscle Milk and Evolve protein brands. Pepsi’s stake in Celsius “may be an initial step toward full ownership,” Bloomberg Intelligence analyst Kenneth Shea wrote. Together, the 2 companies can claim a greater share of the US$18 billion US energy-drink market, he said.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, CNBC, PSR

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